Meta Platforms, Inc. v. BrandTotal Ltd.

Background

Facebook, Inc. sued BrandTotal Ltd. and Unimania, Inc. over BrandTotal’s collection and marketing of data from Facebook’s Facebook Network and Instagram. Facebook alleged that BrandTotal’s UpVoice and Ads Feed browser extensions used automated commands and users’ browsers to collect public and non-public information, including profile information, advertising-interest information, advertisements, and interaction metrics. Facebook also alleged that BrandTotal violated Facebook’s terms of service and made misleading statements about the websites from which its extensions collected data.

Facebook disabled BrandTotal’s accounts on September 30, 2020, and took other steps to block BrandTotal’s access. Google later removed the extensions from its Chrome Web Store. BrandTotal alleged that it obtained informed consent from participating users, collected information about advertisements they viewed, anonymized the information, and sold aggregated advertising analysis to corporate clients. It claimed that Facebook’s actions harmed its customer relationships, prospective business, financing efforts, and ability to operate.

BrandTotal asserted four counterclaims: intentional interference with contract; intentional interference with prospective economic advantage; violation of California’s Unfair Competition Law, which prohibits unlawful, unfair, and fraudulent business practices; and a request for a declaration that BrandTotal had not breached Facebook’s terms of service.

Legal standard

Facebook moved to dismiss under Rule 12(b)(6), which tests whether the pleaded facts state a legally sufficient claim. The court generally treated factual allegations as true and viewed them in BrandTotal’s favor, but it did not have to accept legal conclusions or unsupported statements. A claim had to include enough factual detail to make liability plausible.

Declaratory-judgment counterclaim

BrandTotal sought a declaration that it had not breached Facebook’s terms because its data collection was not automated, unlawful, misleading, or fraudulent and did not impair Facebook’s products. The court held that BrandTotal’s own allegations described automated access and that BrandTotal acknowledged Facebook’s terms prohibited automated data collection without permission. The court therefore granted Facebook’s motion to dismiss this counterclaim.

BrandTotal’s opposition instead argued that Facebook’s terms were unenforceable as contrary to public policy. Because that theory did not appear in the counterclaim and would largely duplicate BrandTotal’s existing affirmative defense, the court denied leave to amend the declaratory counterclaim. The denial was without prejudice to BrandTotal later seeking leave based on changed circumstances, such as Facebook withdrawing its breach-of-contract claim while BrandTotal still had an interest in challenging the terms.

Interference counterclaims

The court stated that an intentional-interference-with-contract claim generally requires a valid contract with a third party, the defendant’s knowledge of that contract, intentional conduct designed to induce a breach or disruption, an actual breach or disruption, and resulting damage. A claim for interference with prospective economic advantage also requires an independently wrongful act, among other elements.

The court viewed the sufficiency of BrandTotal’s allegations as a close question and said BrandTotal might be able to add more detail about its customer contracts, its ability to operate using non-Facebook data, and what Facebook knew or intended. But the court held that Facebook had a potential legitimate-business-purpose defense. Under California law, enforcing a legally protected interest may justify interference when the defendant acted in good faith, and compliance with legal requirements may also support that defense.

The court concluded that BrandTotal acknowledged Facebook’s prohibition on automated data collection, while its counterclaim did not allege a particular bad-faith motive by Facebook. The court dismissed the interference-with-contract counterclaim based on Facebook’s legitimate business purpose. The court then held that Facebook’s compliance with a Federal Trade Commission order independently supported dismissal of both interference claims. That order required Facebook to deny or terminate access by covered third parties that failed to certify compliance with Facebook’s terms of use. The court dismissed both the interference-with-contract and interference-with-prospective-economic-advantage counterclaims, while later granting leave to amend both claims.

Unfair-competition counterclaim

BrandTotal’s unlawful theory relied on its interference claims. The court dismissed that theory for the same reasons it dismissed the interference counterclaims, including Facebook’s obligation under the Federal Trade Commission order. The court granted leave to amend the unlawful theory.

For the unfair theory, the court treated the claim as involving antitrust principles. It held that BrandTotal had not adequately alleged that Facebook’s conduct threatened or harmed competition. The court granted Facebook’s motion as to the unfair theory but granted BrandTotal leave to amend it, including by alleging harm to competition or addressing the arguments raised in Facebook’s motion.

For the fraudulent theory, BrandTotal relied on alleged statements in Facebook’s terms that users owned their content and controlled their privacy settings. The court held that BrandTotal had not identified a specific misrepresentation with the required detail and had not adequately alleged reasonable reliance. The court’s conclusion states that the fraudulent part of the Unfair Competition Law counterclaim was dismissed with prejudice.

Leave to amend and disposition

The court granted BrandTotal leave to amend its counterclaims for intentional interference with contract, intentional interference with prospective economic advantage, and the unlawful and unfair theories under the Unfair Competition Law. The court noted that it was not deciding whether a claim based on a new version of BrandTotal’s product could be brought, because that product had not yet been released and any related claim might not yet be ready for decision.

The court granted Facebook’s motion to dismiss BrandTotal’s counterclaims and dismissed all counterclaims. The fraudulent theory under the Unfair Competition Law was dismissed with prejudice. The court’s order also denied, without prejudice, leave to amend the existing declaratory-judgment counterclaim, while allowing BrandTotal to seek leave later if changed circumstances made that claim nonredundant.